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Maybe you're looking to diversify your investment portfolio, or maybe you've looked into real estate investing but realized you don't have the time or energy it requires. Real estate investing is rarely truly passive and is not immune to issues like reduced cash flow during periods when you don't have tenants.
Whether you’re a seasoned real estate investor looking for an additional source of income or you’re looking for a less hassle but still profitable opportunity, these are the top alternative investments to consider in 2024.
1. Automated Teller Machine (ATM)
It may come as a surprise in the age of digital payments, but cash is still king. You may have heard stories about cash disappearing during the pandemic, but this is far from what's actually happening.
Cash usage has certainly declined significantly during the pandemic as people have been wary of touching it, and it is also true that cash as a form of payment is less popular among younger people (18-24 years old) and wealthier people, who prefer to use credit cards.
But there's another thing: cash usage may be declining, but cash holdings are not. In fact, a recent survey found that average cash holdings in the U.S. have increased by $5 per person since 2021, including among young people. People prefer to have cash on hand as a backup means of payment, which is why they need ATMs.
ATMs are a great investment opportunity because they are always in high demand from people who prefer cash. On average, an ATM is used 300 times per month, with an average withdrawal of $40 per transaction. Considering that the average ATM fee is $3.50 and this money goes directly to the unit owner, a single ATM can bring in a total revenue of $1,050 per month. Now imagine owning hundreds or even thousands of ATMs.
But that's not all that's great about investing in ATMs. If there's ever been a truly passive form of investing, this is it. You can own hundreds of ATMs anywhere in the country without worrying about maintenance or replacing broken or destroyed ATMs. An ATM maintenance company does it all for you, including insuring your ATMs. That's where ATM Investors comes in. ATM Investors builds, manages, and operates ATM businesses on behalf of Accredited Investors.
Think of it this way: you have a steady, passive income coming from multiple small businesses that already have a guaranteed, stable customer base.
2. Car wash
Car washes are also an alternative to real estate worth considering, but they require significantly more research than investing in an ATM. Overall, car washes are a profitable business, but profit margins vary widely depending on the type and location of the car wash you invest in.
The biggest consideration with a car wash is the initial investment in equipment, which can be significant. Generally, the more you invest, the more profit you'll make in the long run. For example, investing $8,000-10,000 in self-service car wash equipment can bring in approximately $40,000 in profits per year. Or, investing $30,000-50,000 in a fully automated tunnel wash can bring in an average profit of $686,250 per year for a single car wash business.
Investing in an automatic car wash will allow you to avoid spending on staff, but you will need to factor in maintenance costs. When buying a car wash, you should thoroughly research its age, its typical lifespan, and the expected maintenance costs over that period, as these will eat into your profits.
You should also carefully research where you invest. Generally, Snowbelt and Sunbelt regions are the most profitable. This is because places with extreme weather require people to wash their cars more frequently. But on the flip side, there are people who have the exact same idea. That's why some towns enforce car wash bans because they have too many car washes. Ideally, look for a local market that isn't saturated with existing car washes.
3. Self-storage
Self-storage units are the third most profitable alternative investment. There are several reasons why self-storage units are more attractive than traditional real estate investments. The most obvious reason is that they are a lower-risk, high-demand investment. You're still investing in real estate, but with almost no operating costs and less seasonal fluctuations.
This means they lose less than they would if a traditional real estate property sat vacant, and they are protected if self-storage users default on payments because they can put a lien on the user's possessions against the property.
There's a lot of flexibility in the self-storage business, so you can be as involved as you like. You can be a completely passive investor, paying a self-storage management company, or you can manage the business yourself and offer profitable additional services, like valet services to help tenants move.
With low operating costs and flexible options, self-storage offers the opportunity to monetize your real estate with higher returns. The average ROI for self-storage is 20.87%, with a typical cash-on-cash return of 14.5%. This cash-on-cash return is far better than the typical 8%-12% you can earn from a standard real estate investment.
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The only thing to be careful about with self-storage is where you invest. While it's true that demand for self-storage isn't seasonal, it did peak during the pandemic, especially in popular Sun Belt relocation destinations like Phoenix and Atlanta. Demand in these areas has reportedly decreased, so self-storage investors should do the same market research as they would if investing in residential real estate. Look for hot urban areas with high population inflow and rental activity.
4. Gold, silver and other metals
Let’s imagine a slightly different scenario. You’re more focused on preserving the value of your existing capital than generating cash flow. You want zero maintenance costs and involvement, making real estate investing nearly impossible. Even turnkey investments eat into your capital.
If long-term value stability is your main goal, choose gold. The high value of gold and other precious metals has not actually gone anywhere. On the contrary, the price of precious metals continues to rise.
The price of gold alone is up 13.5% as of early June 2024. This doesn't mean gold is necessarily too expensive to buy right now, as even inflation-adjusted prices are still affordable for investors. What this figure shows is how gold prices can reliably soar during times of economic and/or geopolitical uncertainty. Owning gold gives you something to fall back on during volatile times.
But gold is only one part of a vast field of precious metals investment opportunities. Silver has traditionally been considered less profitable than gold, but it is currently trading at its highest price since 2013. Silver is used in everything from LED chips to semiconductors, making it extremely valuable in the long term. The same is true for copper, a key metal in green energy, used in solar panels, EV charging stations, and cables.
Aluminum is the third metal to look at. Its vital importance to the transportation, construction and power sectors makes it a worthwhile investment.
All of these metals are extremely low risk investments as their demand will continue to grow over time, albeit for different reasons. This investment will not give you cash flow, but it will give you security.
5. Private Equity and Venture Capital
The most successful investors have a balanced investment portfolio. Some investments are low risk, some medium risk and some high risk. High risk can be very good. As you've probably heard, high risk also comes with high rewards. You just need to choose wisely.
Private equity investors invest in companies that are not listed on the stock market. Essentially, they invest in start-up companies. In exchange for their investment, they receive an ownership interest in the company.
The high risk comes from the fact that while you may strike gold by investing in the next Apple, you may also end up losing your entire investment in a business that fails within the next two years, as most companies do.
There is only one way to mitigate this high risk of failure: invest in industries you know and understand. Investing in the next cool artificial intelligence (AI) company may seem like a safe bet, but if you know nothing about AI, you are very likely investing in a failure. In every industry, there are true pioneers alongside many mediocre companies that fail to bring anything truly new to the market.
You need to do some thorough research on the industry to understand where it's heading and where the profitable opportunities lie, or hire an investment or financial advisor if you don't mind shelling out a little cash in exchange for some sound advice.
Final thoughts
There are many alternative investment opportunities. Want the safest, lowest risk place to park your money? Consider investing in metals, but don't expect any cash flows. Want easy, high-volume cash flows with minimal involvement? ATMs can do that. ATM Investors is a great company to get started with. Plus, if you have a healthy appetite for risk and deep knowledge of a growing industry, private equity investments can bring you big returns in just a few years.
The key is to evaluate where you stand on the key vectors of risk, commitment, and desired cash flow. Once you have determined what kind of investor you are, you are ready to start researching suitable opportunities in your chosen niche.
This article is provided by ATM Investors
ATM Investors structures, manages and operates the ATM business on behalf of Accredited Investors, and the company's joint venture structure allows Accredited Investors to own the business and assets while benefiting from above-market returns, 60% depreciation rates and a pre-planned exit strategy.
BiggerPockets Note: These are opinions expressed by the author and do not necessarily represent the opinions of BiggerPockets.